News Feature | April 3, 2017

Restaurant And Hospitality News – April 3, 2017

Christine Kern

By Christine Kern, contributing writer


In news this week, Darden is buying Cheddars, while real estate investment fund Leon Capital Group sinks its teeth into Ruby Tuesday’s valuable property, and a new report puts focus on increasing direct bookings and growing online presence for hoteliers.

Darden Set To Acquire Cheddars Scratch Kitchen For $780 Million

Olive Garden parent company Darden Restaurants has announced that it will acquire Cheddar’s Scratch Kitchen for $780 million, adding a casual dining value leader to its portfolio of restaurants. Darden’s current portfolio includes Olive Garden, LongHorn Steakhouse, Yard House, the Capital Grille, Seasons 52, Bahama Breeze, and Eddie V’s.

Founded in 1979 in Arlington, Texas, Cheddar’s currently has 165 locations, including 140 owned and 25 franchised, across 28 states, and the chain features high-quality, made-from-scratch food at reasonable prices.

"Cheddar's is an undisputed casual dining value leader with broad appeal and strong average restaurant volumes," said Darden CEO Gene Lee. "Cheddar's is a great fit in the Darden portfolio because it complements our existing brands. This addition will also enable Darden to further strengthen two of our most important competitive advantages: our significant scale and our extensive data and insights."

Darden reported third quarter revenue and profit figures that were better than anticipated, and they also forecast full-year profit to be above estimates as well, CNBC reported.

The deal is also promising for Cheddar’s leadership. Ian Baines, Cheddar's CEO, stated, "We are excited about the opportunity to be a part of Darden. Our operating philosophy and values are similar and we believe this transaction provides a great opportunity for our team members to continue to grow and develop in their careers. Additionally, Darden's expertise will enable us to further capitalize on our growth potential." 

Struggling Restaurant Chain Is Worth More For Its Real Estate Than Its Business

Recently, The Motley Fool asked the question, “What if Ruby Tuesday threw a buyout party and nobody came?” The chain had announced that it was actively exploring strategic alternatives to raising capital, which ultimately could end in a potential sale or merger of the company. According to The Motley Fool, Ruby Tuesday is “a chain that’s fading in relevance.”  The restaurant chain saw some pretty disheartening figures for its fiscal third quarter ending in February, with revenue at $225.7 million, 17 percent below its already disappointing return last year.

The chain has been closing down locations – dropping from 749 to 613 locations in just 12 months – and their numbers are hurting across the board. These issues all hurt the chances of finding an investor or potential buyer for the chain.

And yet, Leon Capital Group – an investment fund focusing on real estate  -   has announced in federal securities filings that it has made an 9.5 percent investment in Ruby Tuesday Inc. According to The Nation’s Restaurant News, the activist filing means that Leon Capital plans to engage in talks with company management regarding the future of the chain. This signals that Ruby Tuesday’s primary asset is the roughly 300 restaurant locations that it owns (not leases), an asset valued at far more than the company’s market capitalization of almost $160 million.

According to the filing, Leon Capital has acquired its shares since early February and now owns nearly 5.8 million of the company’s shares, which it purchased for $12.6 million. Leon also indicated that Ruby Tuesday’s shares were “undervalued and represented an attractive investment opportunity.”

Leon Capital noted that it “may seek to participate in strategic transactions that the issuer may evaluate or undertake in connection with its recently announced exploration of strategic alternatives.” In short: Leon Capital is interested in Ruby Tuesday’s real estate.

Increasing Direct Bookings and Growing Online Presence A Priority For Hoteliers In 2017

According to a new report from SiteMinder, hoteliers are focusing their attention on increasing direct bookings and growing their online presence in 2017. The findings are detailed in SiteMinder’s Global Hotel Business Index 2017, based on more than 2,100 survey responses from hoteliers representing independent properties and hotel groups around the world.

The report found that the ability to increase direct bookings and grow their online presence was a higher business priority for hoteliers than mobile books or personalization abilities that enhanced guest experiences. SiteMinder says that the paradox is that, in spite of 95 percent of respondents ranking “driving guests to book direct” as a challenge, just 37 percent saw “exploring new hotel technology and systems” as a high priority for their hotel business, representing a disconnect between goals and tools.

“The results of SiteMinder’s inaugural Global Hotel Business Index are, again, evidence of the desire among hotels to maximize online channels and grow their business but also the contradictory hesitation among them to try new technology that can support that effort. What hoteliers struggle to realize is that you can’t prioritize one without the other,” explained SiteMinder managing direct Mike Ford.

“Outdated technology and systems – and the high costs that typically come with those – are rampant in our industry. As the consumers, hoteliers are in a unique position to change that. However, it is on us, as an industry, to understand the reasons for these sentiments and to make our technology more affordable, more accessible, and ultimately more beneficial for the hoteliers we design the technology for,” Ford added.

According to SiteMinder, over the 12 months ending June 2016, hotel customers generated US$16 billion in revenue using the company’s cloud-based booking and distribution technology – a 116 percent increase from two years prior. Of the US$16 billion, US$1.05 billion was made through SiteMinder’s direct booking engine, TheBookingButton, to represent a 43 percent year-on-year increase.

Mike Ford asserted, “We are clearly witnessing an unprecedented rise in online bookings – both direct and via third party channels. With the ability to be set up within days and pay a flat monthly fee as little as US$37 ongoing, SiteMinder’s solutions are examples of how simple it can be for hoteliers to achieve their desire of increasing direct bookings and growing their presence online, and forego the perception that driving guests to book direct is a challenge."